In the current set of bailouts, the government collects income taxes and gives the money to Wall Street. Under cap-and-trade, the government will sell well-heeled financiers the right to impose a massive and extremely regressive electricity sales tax on the nation and collect the revenue for their own profit directly. This will take kleptocracy to an entirely new level.

The Obama administration says that it hopes to raise some $650 billion in revenue for Uncle Sam through the sale of cap- and-trade carbon permits, and there is no reason to doubt this figure. However, that is only the government’s piece of the action. Because of the tax farming feature built into the system, the cost to the public is likely to be far greater.

While publicly justified by President Obama as a means of achieving petroleum independence, the actual purpose of the cap-and-trade system as conceived by the environmental activists currently formulating White House energy policy is to combat global warming. However it won’t contribute to achieving that goal either. Rather, by imposing a costly tax on the U.S. economy, cap-and-trade will cause American-made goods to cost more, allowing them to be displaced to an ever greater degree by those manufactured elsewhere, most notably China. As a result, the American economy will contract while the Chinese economy expands at U.S. expense. Since an even larger fraction of Chinese electricity and industrial process heat comes from coal than does American, the net effect of the cap-and-trade system will therefore be to increase the total carbon emissions released into the Earth’s atmosphere, not decrease it. However not only will Chinese industrialists obtain a larger market share for their products, they will be able to charge more for them, since their competition will be priced even higher. Thus the big losers overall will not only be American manufacturers and workers, but the world’s poor.

It is very unfortunate that the Obama administration has embraced a policy so thoroughly lacking in merit as cap-and-trade. If the goal is to reduce carbon emissions, this could be effectively advanced by removing obstacles to expansion of nuclear power. Instead, the administration has acted to dramatically reinforce such obstacles, most notably by halting the development of a permanent nuclear waste repository at Yucca Mountain, Nevada.

But if the goal is, as the president has said — and as it indeed should be — is to break the hold of the oil cartel, then nuclear power, windmills, and certainly cap-and-trade electricity taxes are all off the subject. Rather, what is needed is a vehicle fleet that can run on liquid fuels that can be obtained independent of OPEC and its allies. This goal could be most quickly achieved by passing a law, such as the Open Fuel Standards Act (HR 1476), requiring that the majority of new cars sold in the U.S.A be fully flex fueled, i.e., able to run equally well on gasoline, ethanol, or methanol (which can be manufactured from any kind of biomass whatsoever, as well as coal, natural gas, and recycled urban trash). Since such a law would impel foreign car makers to switch their lines over to conform to the open fuel standard, this would rapidly transform the global automobile fleet so as to make it compatible with fuels that can be readily produced from non-petroleum sources worldwide, thereby completely unhinging the vertical monopoly of the oil cartel internationally.

Cap-and-trade is very bad for what it is, but it is even worse for what it is not. For the 36 years since the first oil embargo made the need for an effective energy security policy apparent, the American political class has fecklessly failed to deliver. Like the Bush administration’s fantastical hydrogen economy dream, which was a means of achieving energy security before it, cap-and-trade is yet another hoax that avoids solving the critical problem of freeing the nation from the threat of extortion by the oil cartel.

The price of oil is down right now, but only because of the collapse of the world economy. Last December, OPEC took 4 million barrels per day off the world market, so that as soon as the global economy shows any sign of recovery, the price of petroleum will soar to record levels, slamming us right back into recession, and resuming the massive transfer of world power from the West to the Islamists. This must not be allowed to happen.

Dr. Robert Zubrin is president of Pioneer Astronautics, a Senior Fellow with the Center for Security Policy, and the author of "Energy Victory: Winning the War on Terror by Breaking Free of Oil". His newest book, "Merchants of Despair: Radical Environmentalists, Criminal Pseudo-Scientists, and the Fatal Cult of Antihumanism" has just been published by Encounter Books.

Click here to view the 29 legacy comments

Click here to hide legacy comments

29 Comments, 29 Threads

1.
westerncanadian

A good article on the consequences of cap and trade. Manufacturing industries that have to buy carbon permits directly will have higher production costs. Manufacturing industries who have to buy their power at increased cost will also see their production costs rise – an indirect effect of power companies having to buy carbon permits. But production costs for foreign manufacturers will not be affected by cap and trade. Products made in the US will be pushed towards the high end of the global supply curve. When global demand is high US manufacturers may be able to sell their stuff. When global demand is low, as in a recession, they may become marginal producers, unable to compete except in boom times. Already existing competitive disadvantages caused by higher US labour costs will be made worse by additional cap and trade costs.

The results will be lower overall sales with more peaks and valleys. This will mean less jobs in US manufacturing. If lower, more variable sales turn profits into losses, more US manufacturing companies will be forced to go offshore to lower wage countries.

A cap and trade scheme as proposed by the administration is not the only way by which to reduce emissions. A carbon tax shift approach (see: http://www.climatetaskforce.org/2009/03/straight-from-the-headlines/) is being vocally supported by leading economists, scientists and opinion leaders and is gaining steam among pols on both sides of the aisle. And in these economic times, a plan that reduces emissions, incentivizes the creation of climate-friendly technologies AND returns the revenues to the people stands a real chance in Congress.

A more common sense approach to the problem would be to use our oil and gas reserves (yes drill) while setting up the new technology and deciding what is really going to be our replacement fuel. Whether it be hydrogen power some other alternative fuel. We have the oportunity to develop wind, solar and nuclear energy that would be both clean and cheap. The reality of the Obama proposal is the government needs the tax money(yes tax) generated in order to help the government with the trillions of dollars being spent. By the way if you think the government will return revenues to the people, you need to read our history. A tax is a tax and a temporary tax will become permanent. Sensibility would be something along the lines of the Pickens energy plan.

The most blatant dysfunction of cap-n-tax as a way to lessen dependency on foreign oil is that it takes coal liquification a la Fishcer-Tropsch and shale oil off the table.

In other words, not only will it not help reduce imported oil, it will actually increase it. Aside from the feds themselves, who reap a windfall from a tax that goes by another name, the biggest winners are the Saudis.

If this administration were sincere in their claim to want to reduce oil imports, they’d immediately lift the ban on offshore drilling and allow production on ANWAR. The fact that they don’t is irrefutable proof that the entire lot of them, all the way up to the Grand Messiah himself are liars.

I don’t know why the Republicans and Fox are not pounding on the consequences of this plan. Obama has admitted publicly that people’s energy costs will skyrocket and Europe is proof of this. Why is no one telling the average person their electricity and heating bills are going to triple, as well as costs of every product and service made in the US. Why is Obama’s statement not shown over and over. The “unwashed masses” understand their pocketbook and none of them are getting this information. This could be an Obama deal-breaker.

Oil is bad. Coal is bad. Hydrocarbons are bad. Bad bad bad. If you support them, it’s only because you’re getting rich off of them. You’re a cartoon villain like the stereotypes from Captain Planet….

But… there ARE actual reasons why hydrocarbons developed into the dominant fuel source for developed economies. Aside from nuclear power, which is the only thing more evil than both oil and George W. Bush, there are no ‘alternative’ energy sources that are capable of delivering the same output of energy at the same efficiency for a competitive cost. Not right now, anyway. We use hydrocarbons because they provide an incredible amount of energy for an incredibly low price.

Genuine innovation and plentiful energy will NEVER result from governmental mandates, incentives, or market-manipulations.

One the one hand, you can be afraid of CO2; On the other hand, you can be worried about cap-and-trade. Luckily, it would be rather difficult to be afflicted by both.

Carbon dioxide does not bothers me, because it’s mostly natural. It’s cap-and-trade that worries me, because this one would truly be 100% man-made.

Professing that we humans are responsible for the production of CO2 is quite arrogant. In the grand scheme of the whole biosphere, we are not such a big deal. Scheming for the collection of some fiscal punishment for this trumped-up offense would be only plain-vanilla arrogance, only if it was not greed instead.

Why not feel some humility, and be grateful for the divine gift of CO2, the nourishment of the plants?

Al Gore got a (man-made) Nobel prize. Does that make a prophet out of him? Or is declaring oneself a prophet the next best thing after the presidency of the US escaped from your grip?

By the way, how did Obama manage to be a prophet and a president at the same time? Is this constitutional?

If Obama really wanted to break our dependency on foreign oil he would do the following:

1. Drill for oil here. We have lots of it.
2. Encourage diesel cars with tax credits and lowering the fuel tax to the same level as gas.
3. Forget ethanol and methanol.
4. Fast track nuclear power plants.

Professing that we humans are responsible for the production of CO2 is quite arrogant. In the grand scheme of the whole biosphere, we are not such a big deal.

That’s kind of a short cut of an argument, and leaves you open to debate. The fuller argument is that:

1. While there’s generally been, over the long run, a more-or-less carbon balance between the plants and the animals, there’s no physical law that mandates that they be in balance. If we start taking carbon out of long-term storage and returning it to the atmosphere from where it originally came, the plant kingdom can and will grow to accommodate the higher rate of evolution of CO2. The real wrong assumption made by the warmotologists is that the plant kingdom is fixed in size and growth rate. Most of it is in the oceans, and there’s no reason to believe that it’s limited by anything other than the availability of CO2.

2. The warmotologists will then yard out the isotope argument. Which proves exactly nothing. The fact that a preponderance of the C atoms in the atmosphere have the isotopic fingerprint of fossil fuels simply confirms the obvious – that the products of combustion go into the atmosphere. It says nothing about the mechanism that determines the concentration.

Cap & Trade comes down to legalized theft by the administrations cronies of the private citizen and private and public corporations in which they will pick winners and losers.
As we are all learning and some have known forever is that the Sun has the most impact on our Earthly environment and water the next most important, Co2 has very little impact and a good case can be made that we need more Co2 not less.
Since the industrial revolution began we have slowly learned that it is not wise to contaminate or pollute and it just makes sense to preserve and improve rather then use up and destroy. We get better at improving our environment all the time and it would have happened without the government being involved at all, in fact government involvement has made such improvements costlier then they should have been and probably has slowed the entire process down.
Obama uses the “we must get over our dependence of foreign oil” excuse because it’s true (and more important than we think because we are funding those who seek our destruction) and this truth provides the wheat with which to make the rat poison palatable to most Americans that believe in this truth. The author correctly states that Obama’s cap & trade plan will not change our dependence on foreign oil, and also will most likely cause an increase in the price of oil and therefore help our enemies kill us faster.
Whatever happened to “drill baby drill”?

If people allow the climate alarmist contingent to frame the argument that CO2 is something bad, then they will win the argument. Carbon dioxide is as necessary to life as oxygen is. And Cap & Trade is simply a devious way to tax the air you breathe.

If the eco-Marxists would stop their insane obstructionism we could drill for our own oil, tap our vast shale resources and in time become net oil exporters. We have more oil than any nation on earth. If we converted coal to fuel we have centuries worth of fuel.

What we lack is political will. And what would the government do for money if their cap and trade tax actually reduced energy consumption? Then they would be in the same place they find themselves when they raise cigarette taxes and expect people to keep smoking.

This is nothing more than a massive tax grab that will further centralize power in our corrupt, out of control federal government.

The irony of these nut cases crowing about some alleged “global warming” is too much for me here in Montana. It has been snowing at least twice a week for months, and it is doing it again this morning. I am old enough to remember the weather in the 1970′s, and this is very reminiscent of that.

“While the president’s stated objective is indeed worthy and in fact critical to the future of the nation, unfortunately, as a means to achieve it, a carbon cap-and-trade system is a complete non sequitur.”

Mayor Daley of Chicago has “tax farmed” the right to park in Chicago. He got over a billion dollars for the city street parking meters. The cost for parking on city streets has gone up tremendously ($3 an hour in some places). Many Chicago residents are up in arms but Daley says, “Not my problem. We have a contract.”

Note that Daley retained the right to give parking tickets and collect the fines from the parking tickets, I assume Obama will do the same to those that over-produce carbon. It is a win, win, win, lose deal. Win for Daley getting the lump sum. Win for the corporation collecting the parking fees. Win for Daley collecting parking fines. Lose for the citizens with increased costs and decreased business.

RJA says we should decide “what is really going to be our replacement fuel.”

“Deciding” is what we’ve done so far, by subsidizing the ethanol industry. And what has that gotten us? Nothing more than higher corn prices that drive a cut-back in the amount of other crops grown. It certainly hasn’t gotten us a good alternative fuel. Why not let the market develop its own solution? Anyone remember how VHS tapes beat out the Beta format? Market forces. Anyone remember how CDs beat out the LPs? Market forces. I am confident that the American market could develop alternative energy sources if the government would keep its busy fingers out of it. Just because energy sources are more important than music and movies is no reason to stop trusting the market and American ingenuity.

We already know of a great alternative to using coal, but plans for new nuclear plants got shut down in the alarm over the 3-Mile Island incident. Surely you remember that horrible event: the one where safety measures worked and nothing happened?

You are wrong about three mile island. Sure no one got hurt, no radiation released etc. but we did learn that Carter did not know how to pronounce “Nuclear” and looked like crap in an environmental hazard suite. You overlook the important stuff.

Anyhow liberals have this crazy idea that corporations pay taxes. They don’t. They only collect them.

Flush out a cap and trader by proposing cap and divided/rebate instead. All ratepayers pay a carbon tax in their power bill that is kept in an account for them and accumulates in value.

When the value is substantial, and the ratepayer is ready to act, they can request a voucher to be used for approved energy friendly projects:
–energy efficient improvements on their home, insulation, caulking, new Energy Star rated appliances, etc.
–installation of home alternative energy projects like solar, wind, and hydro, and the electrical storage and metering to sell back excess power to the power company
–purchases of low-intensive-fuel transportation like public transport (instead of driving oneself), bikes, motorcycles, scooters, econobox cars, and hybrid sedans and SUV’s, electric vehicles, etc. Imagine buying a car with a voucher to pay for it! You’d do that instead of ponying up tens of thousands of dollars to finance a gas guzzler, now wouldn’t you?!

This would change behavior massively and rapidly and be the green revolution. If everyone was producing excess power at home and selling it back to the power company, there would be no need for coal or nukes.

Cap and trade is a greedy government tax scheme by comparison, that doesn’t result in any change benefitting the environment.

In the short run, there could be a 100% tax credit for installing home energy projects. Those are expensive, but your wealthier early adopters would be all over it and start the ball rolling. Of course, half the population doesn’t pay taxes so this wouldn’t benefit them, which is why the voucher rebate scheme is for all ratepayers and not just taxpayers…everyone has an electric bill.

I don’t believe in any of these schemes BTW, but the divident/rebate/voucher proposal flushes out the real motives of the cap and traders.

The voucher rebate plan is doable–the government did so well with the digital TV coupons. coff coff

BTW I live in coal country and there’s mines shutting down, permitting has stopped, and our rates have already jumped, I believe due to coal scarcity. The coal operators and power company people fully expect cap and trade and said the cost would be passed on to the consumer and their friends on the utility commissions are on board with this.

FWIW, carbon indulgences will hit regions differently. Not that much power is generated from carbonaceous fuel in California, so they’ll be fine. The people who are going to get hammered by this are in the Northeast and eastern Great Lakes region.

Good going, guys! Hope you enjoy your messiah while you freeze in the dark.

“The most blatant dysfunction of cap-n-tax as a way to lessen dependency on foreign oil is that it takes coal liquification a la Fishcer-Tropsch and shale oil off the table.”

All that is far more expensive than Saudi oil, which is the easiest and cheapest on Earth to extract. You can’t beat OPEC at its own game; you have to play a different one instead.

“If this administration were sincere in their claim to want to reduce oil imports, they’d immediately lift the ban on offshore drilling and allow production on ANWAR.”

Wrong. ANWR (learn to spell it before pretending to be an expert on it) has only 16 billion barrels in it. We import 5 billion a year, so it would replace foreign oil for a very limited period. And once we burn off ANWR, then what? It’s like eating your basement emergency rations just to keep the status quo going a little longer rather than changing the situation (like getting a job or switching fuels).

The Mideast has 70% of the world’s oil reserves and we have only 4%. If we do nothing, by 2020 we’ll have 1% of what’s left and they’ll have over 80%. And that’s WITHOUT burning off our ANWR and offshore reserves; if we tapped those we’d have even less.

This is a rigged game and we have to break out. The solution is alcohol fuel.

Jeanie said: ”Deciding’ is what we’ve done so far, by subsidizing the ethanol industry.”

So what?

I’d rather agribusiness and some Midwestern corn farmers get rich from our fuel purchasing dollars than the Iranian nuclear program, Chavez-ite narco-Marxists, and a vast array of assorted Islamist terrorists.

Our ethanol subsidies and tax breaks total less than $10 billion. And conservatives and “free market” types (especially those who take oil money) go into hysterics.

Meanwhile OPEC, a cartel of socialist klepto-tyrannies, restricts production below market demand by state fiat in order to artificially drive up the price in a huge viciously regressive tax on the productive, humane, and free portions of the world to the tune of trillions.

And the same conservatives yawn.

“And what has that gotten us? Nothing more than higher corn prices that drive a cut-back in the amount of other crops grown.”

WRONG. Factually false.

As ethanol corn production has risen, “food corn” production has NOT fallen but risen as well, as have other staple crops.

Only a minority of US farmland is under cultivation so there is tremendous unused capacity.

Ethanol corn has the starch taken out to make fuel, but the vitamins, minerals, and protein are retained to make animal feed for meat livestock. So it ends up on our plates anyway and that corn would have been needed to be grown for feed anyway.

Only a small portion of the retail price of a box of corn flakes comes from the corn, a huge portion comes from energy. By helping reduce petroleum demand, ethanol helps LOWER food prices.

Finally, everyone forgets about methanol with an M, which can be made from coal, natural gas, or ANY biomass without exception (TODAY, no further research necessary) such as sewage, trash, or weeds like kudzu.

“It certainly hasn’t gotten us a good alternative fuel.”

Actually alcohol is an EXCELLENT alternative fuel. Unique among alt-fuels, it is “backwards compatible” with the existing legacy fuel (gasoline). No other alt-fuel can say that – if your compressed natural gas, liquid natural gas, diesel, bio-diesel, vegetable oil, hydrogen fuel cell, or hydrogen internal combustion engine car, or electric vehicle runs low on fuel or charge far away from a refueling station that carries your exotic alt-fuel (or a recharge station), you are out of luck.

But a flex-fuel vehicle low on alcohol and far from an alcohol pump can just fill up on gasoline, no problem. That makes the transition easy and painless.

And at $100 FFV tech costs a fraction of what gasoline-electric hybrid tech does (thousands).

Alcohol burns clean, can’t cause Exxon Valdez style disasters, and because its resource base is so wide, can’t have its market “cornered” by an OPEC-like entity so the price will be permanently reasonable.

“Why not let the market develop its own solution?”

Because OPEC controls the market, genius. They have the by far deepest, cheapest, and easiest to extract oil reserves of anyone with an enormous and decisive portion of capacity relative to demand.

We have a huge chicken-and-egg dilemma. Nobody demands alternate fuel capacity in their cars because they see no gas stations with alternate fuel. Gas stations won’t provide that fuel in part because there are so few cars that can use it and thus few potential customers.

We could wait decades for the market to resolve this as it did the cell phone vs. cell phone tower chicken-and-egg dilemma but we are at WAR and Captain Market in dis cape and tights has not yet rescued us.

We ordered Ford to make tanks in WW2; this is a much smaller deal. The total cost is less than what we spent on foreign oil in 5 hours in 2008.

“Wrong. ANWR (learn to spell it before pretending to be an expert on it) has only 16 billion barrels in it. We import 5 billion a year, so it would replace foreign oil for a very limited period. And once we burn off ANWR, then what? It’s like eating your basement emergency rations just to keep the status quo going a little longer rather than changing the situation (like getting a job or switching fuels).”

I don’t know where you got your information, but for the most part, it has been reported that ANWR & North Slope of Alaska’s Prudhoe Bay have more crude and nat. gas than all the rest of the world’s known reserves combined. Also, checking the U.S.G.S. reports, it has been reported that other formations, e.g. Bakken and the Rockie Mts. have more than 8 times the crude and nat. gas than Saudi Arabia.

Even if ANWR has limited supplies, it would be foolish to ignore the value of utilizing this resource now, especially when our economy is in the toilet.

WASHINGTON, December 8, 2008 – The development of America’s vast domestic oil and natural gas resources that had been kept off-limits by Congress for decades could generate more than $1.7 trillion in government revenue, create thousands of new jobs and enhance the nation’s energy security by significantly boosting domestic production, a study released Monday shows.

The ICF International study, commissioned by the American Petroleum Institute (API), shows that developing the offshore areas that had been subject to Congressional moratoria until recently, as well as the resources in Alaska’s Arctic National Wildlife Refuge and a small portion of currently unavailable federal lands in the Rockies, would lift U.S. crude oil production by as much as 2 million barrels per day in 2030, offsetting nearly a fifth of the nation’s imports. Natural gas production could increase by 5.34 billion cubic feet per day, or the equivalent of 61 percent of the expected natural gas imports in 2030.

The study also estimates that the development of all U.S. oil and natural gas resources on federal lands could exceed $4 trillion over the life of the resources.

Albert Einstein said, the definition of insanity…“doing the same thing over and over again and expecting different results.”

I hope someone begins to listen to wisdom soon as we have very little time to figure out how to live without food and electricity. If we shut down our power sources by taxing them into oblivion, further breaking the back of what industry we have left, and by using up our food supply for producing alcohol fuels for power and transportation, we won’t be able to survive much longer as a nation.

There comes a time when ideology and extremism becomes impractical and counterproductive. This is one of those times.